A New Low in Campaign Finance

By Robert Maguire

Oct. 27, 2015

ONE corner of the world of “dark money” just got a little brighter, and it doesn’t bode well for the 2016 election.

A recent tax filing by Carolina Rising, a 501(c)(4) social welfare organization, shows that in 2014 the group spent $4.7 million on ads that had one thing in common: touting the legislative accomplishments of Thom Tillis, who was then North Carolina’s speaker of the House. That year, Mr. Tillis also happened to be trying to unseat Kay Hagan, the incumbent Democratic senator.

Carolina Rising spent the money in a three-month blitz leading up to Election Day, but we may never learn where these millions came from. The partial disclosure required of 501(c)(4) outfits means that while we do know that 98.7 percent of the group’s revenue came from a single donor and that virtually every penny of it was used to further the cause of Mr. Tillis’s campaign, we don’t know who Carolina Rising’s secret benefactor was.

John Koskinen, the I.R.S. commissioner, is scheduled to testify today before the Senate Finance Committee at yet another hearing on the agency’s heightened scrutiny of certain politically active 501(c)(4) groups in 2010-12. But what we should really be paying attention to is the increasing use of dark money to influence our elections, and the rising number of groups that devote themselves to a single candidate (including several, already, in this cycle’s presidential campaign). Before the 2014 campaign, nonprofits like that didn’t exist.

Election-related spending by groups that don’t disclose their donors has grown exponentially in the last few years, thanks in part to the Supreme Court’s 2010 ruling in Citizens United v. F.E.C. The expenditures reported by these groups rose from just under $6 million in 2004 to $308 million in the last presidential election. This time around, that spending is already at $4.9 million, more than tenfold what it was at the same time in the 2012 cycle. And that doesn’t include the significant chunks of political spending that go unreported.

Still, groups like these are obliged to follow some basic rules: 501(c)(4) organizations are not supposed to spend a majority of their resources on political activity, a requirement that leads to impressive accounting and definitional acrobatics. More important, these groups are not supposed to function for the private benefit of an individual or a select group.

Carolina Rising appears to have broken both rules. Within five months of being formed, and just three months before the general election, Carolina Rising kicked off an onslaught of television ads applauding Mr. Tillis for his work on education and health care in North Carolina. The ads never asked viewers to vote for Mr. Tillis.

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Thom TillisCreditMike Belleme for The New York Times

Perhaps this framing was meant to allow the group to claim that it was talking about issues, rather than supporting the candidate outright. But the firm buying the ads on behalf of Carolina Rising, Crossroads Media, repeatedly described the “issue” in its ads as some variation of being pro-Thom Tillis. In at least one contract, the stated issue was “supporting Thom Tillis, senatorial candidate for N.C. (R) - election on 11/4/14.”

Dallas Woodhouse, the Republican consultant who ran Carolina Rising, did away with any further pretense when he was interviewed live by a local news channel at the Tillis campaign’s election-night victory celebration. Sporting a Thom Tillis hat, Mr. Woodhouse, who was named executive director of the state’s Republican Party last month, was asked about his group’s spending “a whole lot of money to get this man elected.”

Mr. Woodhouse responded, “$4.7 million. We did it.”

Yet less than a year later, when it came time for Carolina Rising to report its activities to the I.R.S., it said it had not engaged in “direct or indirect political campaign activities on behalf of or in opposition to candidates for public office.”

In an email, Mr. Woodhouse said that the ads his group paid for were “not political in nature” but highlighted issues Mr. Tillis would routinely deal with as a state legislator. They ran during an election for “maximum exposure,” he said, not to influence Mr. Tillis’s Senate bid. He also dismissed his “overly excited election night comment” as “not reflective of the organization’s actions.”

Carolina Rising has no credible claim to being a social welfare organization. But the key thing to remember here is that Carolina Rising is not an outlier. It’s a trailblazer. In 2014, it was one of a new breed of politically active nonprofits that sprang up to assist a single candidate’s bid for a seat in Congress, with money from donors whose identities don’t have to be revealed.

The largest was the Kentucky Opportunity Coalition, which supported Republican Senator Mitch McConnell’s re-election with more than $8.2 million in reported political spending. Another group, Oklahomans for a Conservative Future, spent nearly $1.3 million backing the state legislator T. W. Shannon’s failed bid to be the Republican nominee for that state’s open Senate seat.

Carolina Rising is the first of these nonprofits to file a tax return covering the midterms. Yes, that’s history now, but this is the most recent info available; such groups don’t have to submit their returns until 11 months after the end of their fiscal year, so it’s impossible to track them in anything like real time.

But the document could be highly instructive for anyone paying attention to developments in campaign finance, including voters. It is also fair to wonder whether the Federal Election Commission and the I.R.S. will act to enforce existing laws. In recent years, the election agency has been frozen by partisan deadlock, and the I.R.S. has been cowed by Congress, while politically active groups have pushed through boundaries that once seemed impregnable, even in the opaque world of campaign finance.

Has Carolina Rising set the bar low enough for either the F.E.C. or the I.R.S. to say, finally, that enough is enough?

Robert Maguire is the political nonprofits investigator at the Center for Responsive Politics.